Under the terms of the agreement, Akzo Nobel will test AFC Energy's low cost hydrogen fuel cell technology at its Bitterfeld site in Germany to generate clean energy from the substantial quantity of hydrogen that is currently produced as byproduct at chlorine production plants. The economical feasibility of larger units to convert hydrogen from an electrolysis process to electricity and useful heat will be
evaluated.

The current excess hydrogen produced by Akzo Nobel would support approximately 5-10 Megawatts of green electricity generation at the Bitterfeld site and the AFC business model will offer a capital payback within three years with effective zero cost electricity thereafter.

The replaceable electrode technology will enable the ongoing maintenance of the units well past the five year guaranteed operating period.

Howard White, Chairman, AFC Energy said;
"The fuel cell industry has to-date been focusing on technological developments and the advancement of fuel cell components. Today marks a significant transition for the fuel cell industry demonstrating that our fuel cell technology is becoming a commercial and viable reality.

”With AFC Energy's single priority of developing commercial applications for its fuel cells this agreement sees a step change for the industry as the company becomes the first fuel cell concern to provide an end-user with a clean energy solution without cost disadvantage.

"The relationship with Akzo Nobel is a vital step in the adoption of our remarkable and unique technology. It is particularly reassuring to be in a commercial relationship with a company such as Akzo Nobel, one that is totally familiar with the electrolysis process and with the handling of large quantities of hydrogen on a constant basis. We look forward to enjoying a close working relationship with Akzo Nobel and we
congratulate them on their vision for being a leader in their own industry for the production of clean energy."

Knut Schwalenberg, General Manager Chlor-Alkali of Akzo Nobel added:
"The Chlor-Alkali industry is energy intensive, so improving energy efficiency is a top priority to keep the processes sustainable.

“Huge amounts of hydrogen are produced in the electrolysis process as by-product of chlorine and caustic lye. The immediate conversion of this hydrogen into electricity, based on locally installed fuel cells, and the use of this electricity back in the electrolysis process would create an ideal loop. Akzo Nobel regards the technology of AFC Energy as promising and we are looking forward to the results of the cooperation."

AFC Energy recently completed a private placing to raise a further £1.0 million to accelerate its development. Prior to this several million has been spent on developing the technology since 2001.

About alkaline fuel cells

• Alkaline fuel cells convert air and hydrogen into electricity and heat and are the most reliable, efficient and versatile of all the fuel cell technologies with several existing commercial and military applications (Russian & US Navies).

About AFC's technological development

•Using low cost materials, the fuel cell design incorporates easy operation, functionality and maintenance with accessible and recyclable, replaceable products. The system has a low complexity with minimal system and moving components reducing overall cost, weight and volume with high
 evels of system reliability.

•The production uses mass manufacturing processes that are repeatable and well known technologies to reduce the high volume production costs.

•The electrode configuration and material selection uses commonly available, low cost, mass manufactured materials. System efficiencies are achieved by reducing the component count and balance of plant losses.

Collaboration agreements

•AFC Energy has collaboration agreements with Surrey and Cambridge Universities. Dr Keith Williams of Cambridge University and Professor Bob Slade of Surrey University are members of the AFC Energy's technical team.

•AFC Energy also has collaboration agreements with industry both nationally and internationally, where extensive connections have been made with the plastics, electronics, materials, and manufacturing sectors.

AFC Energy's technologies

•AFC Energy has developed technologies that use non-precious metals as their core component and has developed unique configurations and application of the substrate, conductor and catalyst.

•AFC Energy's technologies provide an ultra low cost electrode and system over existing alkaline fuel cells. The patents applied for cover:

- Dry side electrode, ensuring minimum erosion and good longevity
- Water neutral operation and management system
- Depression based pressure differentiation
- Closed loop output optimisation
- Replaceable Electrode design
- Electrode material selection and configuration
- Voltage monitoring and system control